Tax season can be a stressful time for a business. Depending on the structure of your business and financial circumstances, your company’s tax situation may vary. But every year, the obligation is due.
Paying taxes isn’t fun for anyone, but limit the stress by preparing for next year, starting now. A little preparation helps both founders and their businesses prevent multiple tax-related issues including:
Ready to prepare for next season? Here is a list of common sense and actionable steps.
You’ve probably heard the old adage, “takes money to make money”. Thankfully, the IRS understands this and has over a dozen categories of deductible expenses for businesses. A dollar of qualifying expenses is a dollar you can write off of your taxable revenue.
While some expenses fall outside the deduction policy, many common purchases do count.
Take some time to understand these categories and use that knowledge to create an accurate budget. Proactively planning deductible expenses is a whole lot better than scrambling to find receipts at the beginning of the new year.
Better align expenses by:
One way to lower the tax burden is via deductible expenses. Another way is to use incentives, like tax credits. While there are a number of credits, they do change over time. Typically, these credits fall into three categories:
Note: It’s a good idea to have a conversation with an accounting professional who understands the changing landscape of tax credits.
You’ve got your categories set and understand potential credits for next year. Now, it’s time to keep track of those expenses. What’s the best way to regularly maintain your business finances?
Reporting and sound accounting. And it’s not simply expense reports.
Not only will these reports make filing next year seamless, you’ll also have accurate quarterly payments. Which leads to the next point.
Individuals often like getting a “tax refund” when they file. It’s like a savings account that the government holds for them. Talk to most financial advisors and they’ll tell you it’s a horrible idea to overpay for anything—including your tax obligations.
Pay too little and potentially get hit with interest and late fees. Too much and that’s cash you could’ve used to reinvest in your business (maybe leading to more deductions). But paying the right amount, that’s what any business wants.
No fees, and every dollar in your direct control.
The previous reporting tip goes a long way toward preparing your business for quarterly payments.
A forecast predicts revenue and detailed expense budgets show qualified upcoming deductions. Based on that data, your installments will be very close to the target—meaning you’ll avoid fees while keeping the right amount of money in your accounts.
There are plenty of mistakes made when filing. For example;
Other mistakes happen throughout the year, well before you even file your taxes. Common examples here include:
Know qualifying deductions and align your expenses accordingly. Take advantage of every credit that makes sense for your business. Create meaningful reports to pay exactly what you owe to the IRS. And avoid common problems that plague so many startups and small businesses.
Partner with Founder’s CPA and our experts will help you plan your business taxes to avoid undue burdens and ensure you’re ready to file quickly all year round.